Opinion
C.A. No. 99C-09-168-JTV.
Submitted. August 11, 2003.
Decided: August 20, 2003.
Ollia N.M. Rybakoff, Esq., Department of Justice, Wilmington Delaware. Attorney for the State of Delaware.
C. Scott Reese, Esq., Cooch Taylor, Wilmington, Delaware. Attorney for Defendants Wellington Homes, 397 Properties and Albert Tina Marie Vietri.
Adam Balick, Esq., Balick Balick, Wilmington, Delaware. Attorney for Defendants Christiana Ventures and Joseph Capano.
Richard H. Cross, Jr., Esq., Wilmington, Delaware. Attorney for Defendant Joseph Capano.
Upon Consideration of Defendant's Motion For Partial Summary Judgment DENIED.
ORDER
Upon consideration of the defendants' motion for partial summary judgment, the plaintiffs response, and the record of the case, it appears that:
1. In this action the Attorney General seeks civil penalties from the defendants under Delaware's Consumer Fraud and Deceptive Trade Practices Acts. Under those acts, the Attorney General may seek civil penalties if it is determined that a party has willfully violated the provisions of either act. The Attorney General contends that the defendants committed numerous violations of both acts in the course of marketing, selling and constructing new homes in a residential subdivision known as Lea Eara Farms which is located in the area of Middletown, New Castle County, Delaware.
2. The defendants have moved for summary judgment on the counts of the complaint which allege violations of the Deceptive Trade Practices Act ("the Act"), contending that it applies to sales of goods and services and not to the sale of real estate. Their activities, they contend, involve the sale of real estate. The Attorney General contends, in response, that the Deceptive Trade Practices Act does apply to the sale of real estate. The Attorney General also contends that the Act applies to the defendants' activities in this case because the alleged violations arise from the sale of home construction goods and services, not from a sale of real estate.
3. Summary judgment should be rendered if the record shows that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. The facts must be viewed in the light most favorable to the nonSuperior moving party. summary judgment may not be granted if the record indicates that a material fact is in dispute, or if it seems desirable to inquire more thoroughly into the facts in order to clarify the application of the law to the circumstances. However, when the facts permit a reasonable person to draw but one inference, the question becomes one for decision as a matter of law.
Court Civil Rule 56(c).
Guy v. Judicial Nominating Comm "n, 659 A.2d 777, 780 (Del.Super. 1995) Figgs v. Bellevue Holding Co., 652 A.2d 1084, 1087 (Del.Super. 1994).
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
Wooten v. Kiger, 226 A.2d 238 (Del. 1967).
4. The defendants rely upon two Delaware Supreme Court cases. They are the cases of Young v. Joyce and Stephenson v. Capano. Young involved a sale of an existing house. The Court rejected the contention that the Deceptive Trade Practices Act applied to the transaction. In doing so, it stated that Delaware's Deceptive Trade Practices Act "codifies the Uniform Deceptive Trade Practices Act which, in turn, codifies the common law of unfair competition, ( citation omitted,), and therefore is inapplicable to the facts of this case."
351 A.2d 857 (Del. 1975).
462 A.2d 1069 (Del. 1983).
5. "Unfair competition" at common law, generally speaking, referred to unfair competition between businesses or trades. The prefatory note to the 1964 Uniform Deceptive Trade Practices Act speaks of the law of unfair competition as follows:
Deceptive conduct constituting unreasonable interference with another's promotion and conduct of business is part of a heterogeneous collection of legal wrongs known as "unfair trade practices." This type of conduct is notoriously undefined. Commonly referred to as "unfair competition," its metes and bounds have not been charted. The tort action for deceptive trade practices or "passing off' developed from the common-law action for trademark infringement. ft embraced imitation of fanciful and coined marks and names as well as trademarks. The action was historically available whenever one trader diverted patronage from a rival by falsely representing that his goods were the goods of his rival.
Chief Justice Layton described "unfair competition" as follows:
The essence of unfair competition is the fraudulently seeking to sell one's goods for those of another, and the true test is whether the defendant's acts are reasonably calculated to deceive the average buyer under the ordinary conditions prevailing in the particular trade.
Coca-Cola Co. v. Nehi Corporation, 36 A.2d 156, 165 (Del. 1944).
Coca-Cola Co. v. Nehi Corporation, 36 A.2d 156, 165 (Del. 1944).
Most importantly, as far as this case is concerned, the common law of unfair competition was never thought to have any applicability to the selling of a house or other parcel of real estate from one person to another.
6. Stephenson also involved a house, although the house in that case was a proposed townhouse which, it appears, had not yet been constructed when the dispute arose. The Court, citing Young and the text of the acts prohibited by the Deceptive Trade Practices Act, stated that the Act prohibits certain conduct with respect to the sale of goods and services, but does not apply to sales of real estate. In what appears to be the underlying Superior Court decision in Stephenson, the Superior Court judge referred to three unreported decisions, one by the Court of Chancery and two by the Superior Court, which held that the Deceptive Trade Practices Act applies to sales of goods or services and not sales of real estate. All of these cases lead to the conclusion that in the years following the enactment of the Deceptive Trade Practices Act, judicial opinion was uniform in this state that the Act applied to sales of goods or services and did not apply to a sale of real estate.
462 A.2d 1073. The prohibited acts are set forth in 6 Del. C. § 2532 6 Del. C. § 2532 (a).
Stephenson v. Capano Development Inc., 1982 Del. Super. LEXIS 985 (Del.Super. 1982).
7. Although not directly relevant to the issue presented, it is worthy of note that in Grand Ventures, Inc. v. Whaley the Delaware Supreme Court held that only a business or trade owner who was the victim of unfair or deceptive trade practices could bring an action to enforce the Deceptive Trade Practices Act. Consumers were held not to have standing under the Act. It would seem to follow, therefore, that neither plaintiff in Young or Stephenson had standing to bring an action under the Deceptive Trade Practices Act to begin with, although neither case was decided on that issue.
632 A.2d 63 (Del. 1993).
8. Although the Attorney General contends that the Deceptive Trade Practices Act has always covered transactions in real estate, the active development of the Attorney General's argument begins with an amendment to the Act which became law in 1994. In that year the Attorney General was given authority to enforce the Deceptive Trade Practices Act. The pertinent amendment reads as follows:
69 Del. Laws Ch. 203; 29 Del. C. § 2517(c)(2); 6 Del. C. § 2533(d).
The Attorney General shall have standing to seek, on behalf of the State, any of the remedies enumerated in this section for violations of§ 2532 of this title against affected persons including but not limited to consumer purchasers.
The grant of standing to the Attorney General to seek remedies for harm to consumers expanded the Deceptive Trade Practices Act beyond the common law of unfair competition. In 1998 this provision was amended to read as follows:
The Attorney General shall have standing to seek, on behalf of the State, any remedy enumerated in this section for any violation of § 2532 that is likely to harm any person, including but not limited to individual retail purchasers and consumers of goods, services or merchandise. (emphasis added).
71 Del. Laws Ch. 470; 6 Del. C. § 2533" 6 Del. C. § 2533 (d).
71 Del. Laws Ch. 470; 6 Del. C. § 2533" 6 Del. C. § 2533 (d).
The synopsis to the 1998 bill indicates that the amendment was intended to clarify the Attorney General's ability to pursue violations of 6 Del. C. § 2532 6 Del. C. § 2532. The Attorney General contends that "merchandise" includes real estate and that the Deceptive Trade Practices Act's applicability to sales of real estate has now been clarified. In support of this contention, the Attorney General points to the definition of merchandise in the Consumer Fraud Act. That act defines merchandise as follows:
§ 2532 sets forth the prohibited trade practices.
"Merchandise" means any objects, wares, goods commodities, intangibles, real estate or services.
6 Del. C. § 25116 Del. C. § 2511 (4).
6 Del. C. § 25116 Del. C. § 2511 (4).
The Attorney General argues that under the doctrine of pari materia, the word "merchandise" should be defined consistently in both acts. Since "merchandise" expressly includes real estate in the Consumer Fraud Act, the Attorney General argues, it should also include real estate in Deceptive Trade Practices Act. If the Attorney General's argument is correct, then it follows that the Attorney General has standing to seek remedies under the Deceptive Trade Practices Act for harm to purchasers of real estate where no sale of goods or services is involved.
9. There are countervailing factors, however, which do not support the Attorney General's argument. The prohibited acts which the Deceptive Trade Practices Act condemns are set forth in § 2532 in 12 paragraphs. They have not been materially altered, if at all, since the Act was originally adopted. Nine of those paragraphs expressly apply to transactions or matters relating to goods, or goods or services, not real estate. None of the 12 paragraphs expressly, or by implication, pertain to an isolated sale of real estate. Moreover, the word "merchandise" does not, by common definition, include real estate. In addition, the introductory phrase to the definitional section of the Consumer Fraud Act states that the definitions apply to that subchapter. The Deceptive Trade Practices Act is contained in a separate subchapter. It has its own section of definitions, and the word "merchandise" is not among them. Interpreting "merchandise" to include real estate in the Deceptive Trade Practices Act stretches statutory interpretation too far. For these reasons, I reject the plaintiffs contention that the word "merchandise" in the Deceptive Trade Practices Act includes real estate. The above-mentioned cases which held that the Deceptive Trade Practices Act does not apply to a sale of real estate would appear still to be good law, until either a reinterpretation by the Delaware Supreme Court or a new statutory amendment clearly extends the Deceptive Trade Practices Act to simple real estate transactions not involving a sale of goods or services.
10. The Attorney General's alternative contention is that the activities of the defendants in this case do, in fact, involve the sale of goods and services. A contract for the construction of a new home, the Attorney General contends, is a contract for the sale of construction goods and services. Whether the construction of a new dwelling involves goods or services is not something that was considered in the cases relied upon by the defendants. This alternative contention has more persuasive force than the Attorney General's first contention.
11. Apart from the existence of the disputes which give rise to this case, the manner in which new homes were sold in Lea Eara Farms seems typical of the manner in which homes are often sold in new real estate developments. A model home is available for inspection, as was the case here. The buyer may be able to select from among several models through the use of advertising materials which show floor plans and the like. The buyer is often offered options for extras or upgrades. These options sometimes deal with the quality or grade of materials. Sometimes they are additional features. The price of the home is adjusted as the buyer makes his and her choices. The parties then enter into a contract in which the developer agrees to construct the home and the buyer agrees to buy it upon completion. All of this goes on in a context of marketing and advertising efforts on the part of the developer.
12. The task of building a new house for a buyer, with its attendant labor and expertise, is a service. Many of the counts of the complaint alleging violations of the Deceptive Trade Practices Act address themselves to acts related to the construction of the house, such as alleged deviations from the model home, failure to include standard features, deviations from plans as approved by the county, failure to comply with the county building code, substandard construction, and the like. I am persuaded that new home construction, as described above, does involve a package of goods and services. They are goods and services notwithstanding the fact that they are ultimately combined into an assembled dwelling which becomes real estate on a lot which is also included in the sale.
13. The conclusion that new home construction is a sale of goods and services is consistent with a number of authorities in other jurisdictions which have arrived at the same or similar conclusions.
Woods v. Littleton, 554 S.W.2d 662 (Tex. 1977); Jim Walter Homes, Inc. v. Mora, 622 S.W.2d 878 (Tex.App. 1981); Precision Homes, md. v. Cooper, 671 S.W.2d 924 (Tex.App. 1984); Keiber v. Spicer Construction Co., 619 N.E.2d 1105 (Ohio App. 1993); McKinney v. State, 693 N.E.2d 65 (md. 1998); Polonetsky v. Better Homes Depot, Inc., 760 N.E.2d 1274 (N.Y.Ct.App. 2001)
14. Although Stephenson involved the sale of a townhouse which had not yet been constructed, it is distinguishable from this case. The dispute in that case arose because the developer refused to sell the townhouse as agreed, leading to a decree of specific performance in the Court of Chancery. An action followed in the Superior Court for damages for loss of mortgage financing which had been promised as part of the original contract. Stephenson addressed issues relating to damages from the loss of financing. The dispute did not arise out of the construction of the townhouse itself. Whether or not disputes arising from the construction of anew home could be disputes involving goods and services was a question not fairly presented to the Court.
15. The two cases relied upon by the defendants are not dispositive. The construction of a new home does involve a sale of services and goods associated with those services. The defendants are not entitled to judgment as a matter of law.
16. One of the homes involved in this case is the model home, which was sold to a buyer. The record of the case, as presented to the Court, is insufficient to allow a judgment to be formed as to whether the sale was a simple sale of real estate, or a transaction which included goods or services. When the facts and circumstances surrounding the sale of the model home are more developed in the record, summary judgment as to the model home can be considered.
17. Therefore, the defendants' motion for partial summary judgment is denied.